CEO Out, Stocks Up

FOR most businesses the departure of a CEO would herald a period of market uncertainty and instability, but for American Apparel - who ousted controversial CEO Dov Charney earlier this week - the opposite has been true. Investors seemed supportive of Charney's removal and the brand's stock rose 6.7 per cent with more than 18 million shares traded yesterday - much more than the 2.8 million daily average over the past three months.

Charney seemed unfazed yesterday by the media whirlwind surrounding him, stating only: "There's nothing I have to say right now," following lengthy meetings with the board, which felt that it was left with no alternative but to suspend him.

"We take no joy in this, but the board felt it was the right thing to do," Allan Mayer, who was named co-chairman along with David Danziger, told WWD. "Dov Charney created American Apparel, but the company has grown much larger than any one individual and we are confident that its greatest days are still ahead."

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Having been accused of sexual harassment and assault by several former employees in the past, all of which Charney denied, it appears that he had settled pending litigation without the board's knowledge or approval, creating the "straw that broke the camel's back".

"When the board looked into certain settlements that were not authorised, it became apparent that some duties could have been breeched by Dov," a source said.